Business

Let your building do the earning

Article Abstract:

Sub-letting the unused areas of their premises provides companies with a way of lowering overheads and generating added income. Such a move, however, has many implications that need to be considered. On the legal front, companies would have to check if they are authorized to sub-let and if there are conditions that have to met before such an arrangement can be made. On the management front, the addition of new occupants gives rise to several questions, including how the space is to be divided between the tenant and the sub-tenant. In terms of the physical aspects of the premises, companies must also consider the convenience of the sub-tenant. For example, a building dominated by the company's signage may make it difficult for the sub-tenant to establish it own identity. Considering the many issues that need to be addressed, firms planning to sublet would do well to seek expert advice.

Lease or buy?

Article Abstract:

Over half of publicly traded UK companies are known to use inappropriate methods for assessing the benefits of using leases as an alternative means to fund capital expenditures. Two lease evaluation methods, based on discounted cash flow techniques, are therefore presented to aid finance directors in deciding between leasing and buying. These widely used methods, the net present value (NPV) approach and the internal rate of return (IRR) approach, are useful for gauging cost-effectiveness as they provide quantitative measures that are often more valuable than the qualitative factors that are usually considered in the decision to lease or buy. These qualitative factors, which still need to be used alongside the NPV and IRR evaluation methods, include interest rate differentials, timing of tax cash flow, services and discounts available from lessors, and flexibility of leasing.

Renegotiating your lease

Article Abstract:

The depressed state of the commercial real estate market provides tenants an excellent opportunity to ask for favorable concessions from a landlord when their leases come up for renewal. Key concessions that tenants could negotiate for include the setting up of break options in their leases, the revision of rents to bring them in line with comparable rents elsewhere, and the removal of upwards-only rent renewal clauses. Other issues that tenants could focus on are the carry-over of use restrictions in the new lease, the inclusion of sub-letting provisions, and the clarification of maintenance and repair agreements.